Friday, September 17, 2021

Transaction Costs in Everything: Thai Taxi Gardens

 For now, at least, Thailand has WAY "too many" taxis.

Parked, they take up a lot of valuable surface area, and create runoff for rain.

But if you put a small plot of "land" atop each taxi...voila! Modular commodification of excess capacity!

As argued in my recent book, these are LITERAL platforms!


Tuesday, September 07, 2021

Is Behavioral Economics Dead? Should It Be?

  Wow....Pretty harsh, from an insider of Behavioral Economics

But also this, rather embarrassing and even ironic since the study was "about" honesty... 

To be fair, Nassim Taleb and a few others have been very critical for a long time. But the collapse of house of behavioral cards is still pretty dramatic. 

Taleb's argument is very plausible: If human behaviors are evolved, then the existence of certain patterns cannot actually be "irrational," though it may be atavistic).




Monday, September 06, 2021

Transaction Costs in Everything

 As any reader of KPC knows, we often credit Tyler Cowen ("LeBron") for his occasional, but always insightful, series of posts on "Markets in Everything.

I have been accused of finding "Transaction Costs in Everything," so I might as well own that. My plan is to post at least weekly on this, and so have a collection of applications.

Prompted in part by this (accurate) comment from the LMM:

An example, then.

We had a piece of furniture, a bed frame actually, that we were going to throw away. But the LMM wondered if someone might want it. So she posted a "free, take it!" listing on NextDoor

Within half an hour, two people had said they wanted it. Instead of sending it to the dump, it was now actually going to be used by someone who needed it.

I was very excited by this, and of course launched off into my rambling: "Do you know WHY this happened, why someone will now use something we were going to throw away?"

LMM: "Well, it's not because of you...." (It is barely possible, as all my coauthors know, that I sometimes take credit for things I did not actually do, I'll admit that. So her response was not out of line...) 

MM: "Quite so. No, the answer is...." (LMM is staring at me, already mildly disgusted at the coming lengthy disquisition)

"transaction costs! Or rather the reduction in transaction costs. The small value of the thing we are giving away, an old bed frame, limits the amount of effort justified by finding someone who needs it. YOU would not have gone door to door, knocking and asking 'need a bed frame? need a bed frame?'  But you didn't have to. Because the transaction costs on both sides, announcing the availability of the free thing and finding a willing taker for the free thing, were reduced by a platform, the bed frame went to a higher valued use instead of the dump! The online platform helped us make better use for a bed platform! It's a triumph of cooperation in the new sharing economy!"

She's got that thousand yard stare at this point.

I continue, very excited: "Such an important, general insight! Why, I bet they'll put 'He's Reducing Transaction Costs in Heaven' on my tombstone!"

LMM (sotto voce): "Soon, I hope."

Thursday, June 10, 2021

Per Capita

 SO many people just repeat the line about the US having the "most deaths from COVID," as evidence that Trump (but NOT the CDC, FDA, and other bureau-nebishes) "botched" the American "management" of  the pandemic. For example,  NPR's constant "America is the world leader in Coronavirus fatalities..."

I have some sympathy for that (except the absolving of the CDC, which was borderline criminally negligent; to be fair, NPR hammered the CDC) view. But it really does matter that the US is a very large country, with a large population. The more relevant consideration is deaths per 100,000, and by THAT measure the US is not even in the top 10 "most deaths." 

Took the data from the Johns Hopkins database, and then deleted all the tiny countries with fewer than 10,000 total deaths (there were MANY countries that had very high death rates per capita, but only a few hundred deaths total, which seems to put TOO MUCH emphasis on the per capita thing...)

The resulting table, deaths per capita as of June 1, 2021, for countries with at least 10,000 total deaths, is reproduced below.  And the results are interesting.

1. The US is not in the TOP TEN.

2. Countries with national health services, including the UK, Italy, and Belgium, have MORE deaths per capita than the US.

3. Sweden, which of course did the "no lockdowns" thing, has FAR fewer deaths per capita than the US. You can say Sweden had more deaths than Sweden WOULD have had, if they had locked down, but clearly locking down everything by force was not a panacea. 

Anyway, if you want to say that the US health authorities got a lot of things wrong, and never acknowledged that they made this much worse than it should have been, I'm with you. But the US is not even close to the "most deaths" if you use a reasonable measure that controls for total population size. 





Wednesday, March 10, 2021

Sam Peltzman Drops the Mic

 As you may recall from my NY Times a piece a few years ago, one has to recognize that the regulatory problem is not just parametric optimization. In my example, the problem was that football helmets, which are actually quite good at protecting the head, result in MORE head injuries. 

Interestingly, last year--2020--there were far fewer cars on the roads, because of social distancing, the shutdown of bars and restaurants, and the fact that many people did not commute to work at all. 

The result: MORE TRAFFIC DEATHS. People drove much more aggressively on the nearly empty roads. To be fair, the total number of accidents did in fact fall by quite a bit, as you would expect. But the severity of the accidents that did happen? That was up sharply, especially outside of cities. 

The point? Regulations have to take into account the likely response of citizens, based on expectations. You can't just twirl dials and pull levers when it comes to public policy. 

 (If you don't get the Peltzman reference....)



Saturday, January 30, 2021

Conversations with Tyler

 People this is what I have to put up with! What follows below is verbatim.

TC:  Lonzo Ball really good! Pelicans could be decent if they make Zion the #3 option.

Angus: So far this year Lonzo is at 11 ppg, 4.6 assists, 2.3 turnovers. His PER is 10. Zion's is 24. Ingram 20. Lonzo is shooting 38.8 from the field, 30.1 from 3 and  58.3 on free throws. His career shooting numbers are about the same as that.  So, that's the opposite of good.

TC: You are like those people who do not wish to approve the AstraZeneca vaccine!

Angus: If he was 56% effective, I would definitely approve him.

TC: Just don't let anyone over 60 years of age watch him play.

Friday, January 29, 2021

Brown Paper Packages Tied Up in String


Most pleasing musical sounds:

1. Electric guitar with Alnico pickups played through a tube amp and a speaker with paper cone and alnico magnet.

2.Hammond B-3 organ

3. Fender Rhodes piano

4. Stradivarius Cello

5. Selmer Paris tenor Sax

I couldn't pick a guitar brand. I play a Reverend guitars East Ender (a tele-strat hybrid). But I have to admit there are a lot of great sounds coming from Gibson too. It's all about the downstream I think. Only 20 Strad cellos ever made, Yo Yo Ma plays one. Here it may be about the compositions for me. Bach's suites for solo cello are some of the very greatest things a human has ever created. Selmer-Paris was Stan Getz's axe.

Thursday, January 28, 2021

F**K, Marry, Kill

 I'm really exhausted by this quixotic attempt at the elevation of (price) theory. As Boettke, Coyne and Leeson (2003) themselves point out, theory has evolved to the point where any proposition is provable, making good empirical work more important than ever.

Take the minimum wage for example. There's the basic supply and demand model that says one thing and there are monopsony and other models that say something else. IT'S AN EMPIRICAL QUESTION!
In the absence of experiments, modern methods that try to get at identifying causal effects are super-important.
If your theory is so right, you should be able to find empirical support in models using the best available methods for the problem.
None of this is to say that empirical work doesn't suffer from file drawer bias or p-hacking, or cannot be influenced by the ideology of the researcher. Of course it can. BUT SO CAN THEORY!!
I really feel like to be a scientist, you have to have at least some tiny part of your brain be willing to consider the possibility that your preferred theory may be wrong.

5 years ago I would have said that raising the minimum wage was a laughably horrible way to try and help people, but today I'm not so sure how bad it really is. Thanks to the research of Dube and company.

Thursday, January 07, 2021

Smoking Hot Takes on Jan 6, 2021

 Three hot takes:

1.  The lack of security at the Capitol was clearly a tactic. I'm not sure the Capitol Police are really at fault, though of course in retrospect it was a really bad mistake. During the BLM marches on the mall, there were fully fitted out infantry/police, 2 or 3 deep, on the Capitol steps. On Jan 6, very few police, and not wearing riot gear. The thought must have been that it would be better not to have a show of force, to avoid provoking violence. 

The police had no way of knowing in advance that Trump was going to throw them under the bus, actually telling his supporters to go to the Capitol and (implicitly) mob it.

I do have a question about the counterfactual: Suppose there had been a substantial show of force, and the mob had attacked (more than a few of the rioters were armed). There would have been dozens of casualties, on both sides. Would that have been better?

For myself, the answer is yes. The symbol of the relatively easy takeover of the Capitol is very bad. But having 5 police and 20 rioters killed and wounded (say) would have been pretty bad also.

2.  DJT made a speech at the rally yesterday. He said that being "weak" was bad, and now was the time for strength. Having the Capitol stormed by a mob, almost without resistance, and having the cops be sprayed with mace and beaten up, and having people breaking into secure areas and the offices of elected officials, is NOT strength.

The only way to make that strength is if you care only about Trump, and hate the U.S.

3. We are lucky that Trump is lazy, incompetent, and shallow. With a competent leader, capable of planning, yesterday could have been an actual coup. Imagine that instead of firing up the mob and then being surprised (I think) that they did something, Trump had in fact led the March to the Capitol. Imagine that he had quietly coordinated that march with even one dissident tank battalion. With 50 tanks, that march could have actually occupied the Capitol and held the Congress hostage.

Instead, Trump went back to the WH to watch TV, like he always does, unless he's playing golf. That's not what Lenin, Stalin, Mussolini, Hussein, or Putin would have done. 

The best analogy is probably Mussolini's "March on Rome," where King Emmanuel likewise did not offer police or military opposition. It's very fortunate that Trump is not capable of carrying out a detailed plan. It could have been much, much worse, since it turns out that the Capitol was wide open for the taking.

Thursday, December 31, 2020

A memory: Murray Weidenbaum

In grad schooI, I worked for Murray Weidenbaum, at the Wash U CSAB, as a research assistant.  He gave me a hard assignment, on the costs of trade barriers. 

I did the research, and wrote a draft. It took about a month. 
It came back completely covered with changes, amendments, cross-throughs, and requirements for more research. There may have been three or four sentences, total, in ten pages, that were unchanged. (This was 1982, in the days of pen and paper revisions).
I was disappointed it was so marked up, and I guess it showed in my face. 

Murray saw that, and laughed. "Look, Mike. This is fine. If it had been bad, I would've made some vague suggestions and told you it was good. That would have been the end of it. And the end of YOU, frankly. I'm don't have time to train RAs."

"Instead, this is a workable draft. Remember: busy people only spend time on good first drafts. You did a competent job, so I spent time on it. Now go finish it." 

He added me as a coauthor (second author, but still). And taught me that no first draft is any good. The GOAL is to have a first draft worth marking up so much that it looks like red spaghetti. That's actually what success looks like!